WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)--LTC Properties, Inc. (NYSE: LTC) (“LTC” or the “Company”), a real estate investment trust that primarily invests in seniors housing and health care properties, today announced operating results for the third quarter ended September 30, 2024.
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Three Months Ended |
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|
|
September 30, |
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(unaudited, amounts in thousands, except per share data) |
|
2024 |
|
2023 |
||
Total revenues |
|
$ |
55,783 |
|
$ |
49,303 |
Net income available to common stockholders |
|
$ |
29,165 |
|
$ |
22,050 |
Diluted earnings per common share |
|
$ |
0.66 |
|
$ |
0.54 |
|
|
|
|
|
|
|
NAREIT funds from operations ("FFO") attributable to common stockholders(1) |
|
$ |
34,556 |
|
$ |
26,679 |
NAREIT diluted FFO per common share(1) |
|
$ |
0.78 |
|
$ |
0.65 |
|
|
|
|
|
|
|
FFO attributable to common stockholders, excluding non-recurring items(1) |
|
$ |
30,383 |
|
$ |
26,679 |
Diluted FFO attributable to common stockholders, excluding non-recurring items, per share(1) |
|
$ |
0.68 |
|
$ |
0.65 |
|
|
|
|
|
|
|
Funds available for distribution ("FAD")(1) |
|
$ |
34,721 |
|
$ |
27,213 |
Diluted FAD per share(1) |
|
$ |
0.78 |
|
$ |
0.66 |
|
|
|
|
|
|
|
FAD, excluding non-recurring items(1) |
|
$ |
30,228 |
|
$ |
27,213 |
Diluted FAD, excluding non-recurring items, per share(1) |
|
$ |
0.68 |
|
$ |
0.66 |
| _______________ | ||
| (1) | NAREIT FFO and FAD are non-GAAP financial measures. A reconciliation of these measures is included in the tables at the end of this press release. |
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More detailed financial information is available in the tables at the end of this press release, the Company’s Supplemental Operating and Financial Data presentation for the 2024 third quarter, and its Form 10-Q, as filed with the Securities and Exchange Commission, both of which can be found on LTC’s investor relations website at www.ir.ltcreit.com.
“Our third quarter was positive, and we are optimistic about the future. By de-levering our balance sheet, we are building sufficient growth capital to take advantage of investment opportunities as they arise,” said Wendy Simpson, LTC’s Chairman and Chief Executive Officer. “The seniors housing and care market continues to improve, and LTC is strategically positioned to generate accretive growth. I believe we have the right team, the right strategy, and the access to capital needed to ensure a bright future.”
Third Quarter 2024 Financial Results:
- Total revenues increased as the result of income received from previously transitioned portfolios, higher income from loan originations, construction loan funding in 2024, and rent increases, partially offset by lower revenue from sold properties.
- Expenses declined primarily due to a decrease in interest expense related to paying down the Company’s unsecured revolving line of credit and scheduled principal paydowns on its senior unsecured notes, and depreciation expense, partially offset by an increase in general and administrative expense.
- Income from unconsolidated joint ventures increased as a result of a 2024 mortgage loan origination.
- Income allocated to non-controlling interests increased due to consolidated joint ventures formed during 2024.
2024 Third Quarter Portfolio Update:
Investment
- As previously announced, committed to fund a $26.1 million mortgage loan for the construction of a 116-unit independent living, assisted living and memory care community in Illinois. The borrower contributed $12.3 million of equity to initially fund the construction. The equity is expected to be fully drawn in early 2025, then LTC will begin funding the commitment. The loan term is approximately six years at a current rate of 9.0% and an IRR of 9.5%.
Mortgage Loan Payoff, Asset Sale, and Note Receivable Paydown
- Received $29.3 million from the payoff of a mortgage loan secured by a 189-bed skilled nursing center in Louisiana;
- As previously announced, sold an 80-unit assisted living community in Texas to the operator for $8.0 million and recorded a gain on sale of $3.6 million. The operator paid $441,000 in rent through the remainder of the initial lease term; and
- As previously announced, received $10.4 million from paydown of the HMG Healthcare working capital note.
Other Revenue
- Recorded $4.1 million of income from former operators related to portfolio transitions in prior years.
Debt and Equity
- Exercised the accordion feature under the Company’s credit agreement increasing its unsecured revolving line of credit by $25.0 million, bringing total commitments to $525.0 million ($425.0 million unsecured revolving line of credit and $100.0 million of term loans);
- Repaid $41.6 million under its unsecured revolving line of credit;
- Repaid $34.2 million in scheduled principal paydowns on its senior unsecured notes; and
- Sold 1,543,100 shares of common stock for $54.7 million in net proceeds under its equity distribution agreements.
Activities Subsequent to September 30, 2024:
- Received the payoff of a $51.1 million mortgage loan secured by a 203-unit independent living, assisted living and memory care community in Georgia;
- Sold a closed property in Colorado for $5.3 million and anticipate recording a gain on sale of approximately $1.1 million in the fourth quarter;
- Sold 226,370 shares of common stock for $7.9 million in net proceeds under its equity distribution agreements; and
- Repaid $93.8 million under the Company’s unsecured revolving line of credit.
Balance Sheet and Liquidity:
At September 30, 2024, LTC’s liquidity was $229.5 million, including $35.0 million of cash on hand, $184.9 million available under the Company’s unsecured revolving line of credit, and the potential to access the capital markets through the issuance of $9.6 million of common stock under LTC’s equity distribution agreements.
Subsequent to September 30, 2024, LTC’s current liquidity is $285.5 million, including $5.4 million of cash on hand, $278.6 million available under its unsecured revolving line of credit, and the potential to access the capital markets through the issuance of $1.5 million of common stock under LTC’s equity distribution agreements.
Conference Call Information
LTC will conduct a conference call on Tuesday, October 29, 2024, at 8:00 a.m. Pacific Time (11:00 a.m. Eastern Time), to provide commentary on its performance and operating results for the quarter ended September 30, 2024. The conference call is accessible by telephone and the internet. Interested parties may access the live conference call via the following:
Webcast |
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USA Toll-Free Number |
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(888) 506‑0062 |
International Number |
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(973) 528‑0011 |
Conference Access Code |
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235941 |
Additionally, an audio replay of the call will be available one hour after the live call through November 12, 2024 via the following:
USA Toll-Free Number |
|
(877) 481‑4010 |
International Number |
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(919) 882-2331 |
Conference Number |
|
51263 |
About LTC
LTC is a real estate investment trust (REIT) investing in seniors housing and health care properties primarily through sale-leasebacks, mortgage financing, joint-ventures and structured finance solutions including preferred equity and mezzanine lending. LTC’s investment portfolio includes 189 properties in 25 states with 29 operating partners. Based on its gross real estate investments, LTC’s investment portfolio is comprised of approximately 50% seniors housing and 50% skilled nursing properties. Learn more at www.LTCreit.com.
Forward-Looking Statements
This press release includes statements that are not purely historical and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the Company’s expectations, beliefs, intentions or strategies regarding the future. All statements other than historical facts contained in this press release are forward-looking statements. These forward-looking statements involve a number of risks and uncertainties. Please see LTC’s most recent Annual Report on Form 10‑K, its subsequent Quarterly Reports on Form 10‑Q, and its other publicly available filings with the Securities and Exchange Commission for a discussion of these and other risks and uncertainties. All forward-looking statements included in this press release are based on information available to the Company on the date hereof, and LTC assumes no obligation to update such forward-looking statements. Although the Company’s management believes that the assumptions and expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. The actual results achieved by the Company may differ materially from any forward-looking statements due to the risks and uncertainties of such statements.
LTC PROPERTIES, INC. CONSOLIDATED STATEMENTS OF INCOME (unaudited, amounts in thousands, except per share amounts) |
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|
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|
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Three Months Ended |
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Nine Months Ended |
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|
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September 30, |
|
September 30, |
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|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Rental income |
|
$ |
32,258 |
|
|
$ |
31,589 |
|
|
$ |
97,464 |
|
|
$ |
94,861 |
|
Interest income from financing receivables(1) |
|
|
7,001 |
|
|
|
3,832 |
|
|
|
14,661 |
|
|
|
11,413 |
|
Interest income from mortgage loans |
|
|
10,733 |
|
|
|
12,247 |
|
|
|
35,842 |
|
|
|
35,417 |
|
Interest and other income |
|
|
5,791 |
|
|
|
1,635 |
|
|
|
9,298 |
|
|
|
5,358 |
|
Total revenues |
|
|
55,783 |
|
|
|
49,303 |
|
|
|
157,265 |
|
|
|
147,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
10,023 |
|
|
|
12,674 |
|
|
|
31,971 |
|
|
|
34,595 |
|
Depreciation and amortization |
|
|
9,054 |
|
|
|
9,499 |
|
|
|
27,173 |
|
|
|
28,085 |
|
Impairment loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
12,510 |
|
Provision for credit losses |
|
|
215 |
|
|
|
189 |
|
|
|
942 |
|
|
|
2,107 |
|
Transaction costs |
|
|
33 |
|
|
|
329 |
|
|
|
679 |
|
|
|
537 |
|
Property tax expense |
|
|
3,186 |
|
|
|
3,271 |
|
|
|
9,816 |
|
|
|
9,751 |
|
General and administrative expenses |
|
|
6,765 |
|
|
|
5,959 |
|
|
|
20,016 |
|
|
|
18,344 |
|
Total expenses |
|
|
29,276 |
|
|
|
31,921 |
|
|
|
90,597 |
|
|
|
105,929 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
||||
Other operating income: |
|
|
|
|
|
|
|
|
|
|
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|
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Gain on sale of real estate, net |
|
|
3,663 |
|
|
|
4,870 |
|
|
|
6,882 |
|
|
|
20,545 |
|
Operating income |
|
|
30,170 |
|
|
|
22,252 |
|
|
|
73,550 |
|
|
|
61,665 |
|
Income from unconsolidated joint ventures |
|
|
692 |
|
|
|
375 |
|
|
|
1,739 |
|
|
|
1,127 |
|
Net income |
|
|
30,862 |
|
|
|
22,627 |
|
|
|
75,289 |
|
|
|
62,792 |
|
Income allocated to non-controlling interests |
|
|
(1,496 |
) |
|
|
(430 |
) |
|
|
(2,332 |
) |
|
|
(1,287 |
) |
Net income attributable to LTC Properties, Inc. |
|
|
29,366 |
|
|
|
22,197 |
|
|
|
72,957 |
|
|
|
61,505 |
|
Income allocated to participating securities |
|
|
(201 |
) |
|
|
(147 |
) |
|
|
(511 |
) |
|
|
(440 |
) |
Net income available to common stockholders |
|
$ |
29,165 |
|
|
$ |
22,050 |
|
|
$ |
72,446 |
|
|
$ |
61,065 |
|
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|
|
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|
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Earnings per common share: |
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|
|
|
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|
|
|
|
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|
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Basic |
|
$ |
0.66 |
|
|
$ |
0.54 |
|
|
$ |
1.67 |
|
|
$ |
1.48 |
|
Diluted |
|
$ |
0.66 |
|
|
$ |
0.54 |
|
|
$ |
1.65 |
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|
$ |
1.48 |
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Weighted average shares used to calculate earnings per |
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common share: |
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|
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|
|
|
|
|
||||
Basic |
|
|
43,868 |
|
|
|
41,153 |
|
|
|
43,313 |
|
|
|
41,127 |
|
Diluted |
|
|
44,394 |
|
|
|
41,211 |
|
|
|
43,839 |
|
|
|
41,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dividends declared and paid per common share |
|
$ |
0.57 |
|
|
$ |
0.57 |
|
|
$ |
1.71 |
|
|
$ |
1.71 |
|
| _______________ | ||
| (1) | Represents rental income from acquisitions through sale-leaseback transactions, subject to leases that contain purchase options. In accordance with GAAP, the properties are required to be presented as financing receivables on the Consolidated Balance Sheets and the rental income to be presented as Interest income from financing receivables on the Consolidated Statements of Income. |
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LTC PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (amounts in thousands, except per share amounts) |
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|
|
September 30, 2024 |
|
December 31, 2023 |
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|
(unaudited) |
|
(audited) |
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ASSETS |
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|
|
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|
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Investments: |
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|
|
|
|
|
||
Land |
|
$ |
118,382 |
|
|
$ |
121,725 |
|
Buildings and improvements |
|
|
1,217,954 |
|
|
|
1,235,600 |
|
Accumulated depreciation and amortization |
|
|
(398,080 |
) |
|
|
(387,751 |
) |
Operating real estate property, net |
|
|
938,256 |
|
|
|
969,574 |
|
Properties held-for-sale, net of accumulated depreciation: 2024—$1,794; 2023—$3,616 |
|
|
4,058 |
|
|
|
18,391 |
|
Real property investments, net |
|
|
942,314 |
|
|
|
987,965 |
|
Financing receivables,(1) net of credit loss reserve: 2024—$3,615; 2023—$1,980 |
|
|
357,889 |
|
|
|
196,032 |
|
Mortgage loans receivable, net of credit loss reserve: 2024—$3,638; 2023—$4,814 |
|
|
360,776 |
|
|
|
477,266 |
|
Real estate investments, net |
|
|
1,660,979 |
|
|
|
1,661,263 |
|
Notes receivable, net of credit loss reserve: 2024—$482; 2023—$611 |
|
|
47,691 |
|
|
|
60,490 |
|
Investments in unconsolidated joint ventures |
|
|
30,602 |
|
|
|
19,340 |
|
Investments, net |
|
|
1,739,272 |
|
|
|
1,741,093 |
|
|
|
|
|
|
|
|
||
Other assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
|
35,040 |
|
|
|
20,286 |
|
Debt issue costs related to revolving line of credit |
|
|
1,548 |
|
|
|
1,557 |
|
Interest receivable |
|
|
58,421 |
|
|
|
53,960 |
|
Straight-line rent receivable |
|
|
18,677 |
|
|
|
19,626 |
|
Lease incentives |
|
|
3,584 |
|
|
|
2,607 |
|
Prepaid expenses and other assets |
|
|
15,095 |
|
|
|
15,969 |
|
Total assets |
|
$ |
1,871,637 |
|
|
$ |
1,855,098 |
|
|
|
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LIABILITIES |
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Revolving line of credit |
|
$ |
240,150 |
|
|
$ |
302,250 |
|
Term loans, net of debt issue costs: 2024—$229; 2023—$342 |
|
|
99,771 |
|
|
|
99,658 |
|
Senior unsecured notes, net of debt issue costs: 2024—$1,098; 2023—$1,251 |
|
|
445,402 |
|
|
|
489,409 |
|
Accrued interest |
|
|
3,757 |
|
|
|
3,865 |
|
Accrued expenses and other liabilities |
|
|
41,120 |
|
|
|
43,649 |
|
Total liabilities |
|
|
830,200 |
|
|
|
938,831 |
|
|
|
|
|
|
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EQUITY |
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|
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Stockholders’ equity: |
|
|
|
|
|
|
||
Common stock: $0.01 par value; 60,000 shares authorized; shares issued and outstanding: 2024—45,034; 2023—43,022 |
|
|
450 |
|
|
|
430 |
|
Capital in excess of par value |
|
|
1,062,374 |
|
|
|
991,656 |
|
Cumulative net income |
|
|
1,707,352 |
|
|
|
1,634,395 |
|
Accumulated other comprehensive income |
|
|
3,639 |
|
|
|
6,110 |
|
Cumulative distributions |
|
|
(1,825,996 |
) |
|
|
(1,751,312 |
) |
Total LTC Properties, Inc. stockholders’ equity |
|
|
947,819 |
|
|
|
881,279 |
|
Non-controlling interests |
|
|
93,618 |
|
|
|
34,988 |
|
Total equity |
|
|
1,041,437 |
|
|
|
916,267 |
|
Total liabilities and equity |
|
$ |
1,871,637 |
|
|
$ |
1,855,098 |
|
| _______________ | ||
| (1) | Represents acquisitions through sale-leaseback transactions, subject to leases that contain purchase options. In accordance with GAAP, the properties are required to be presented as financing receivables on the Consolidated Balance Sheets. |
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LTC PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, amounts in thousands) |
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|
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Nine Months Ended |
||||||
|
|
September 30, |
||||||
|
|
2024 |
|
2023 |
||||
OPERATING ACTIVITIES: |
|
|
|
|
|
|
||
Net income |
|
$ |
75,289 |
|
|
$ |
62,792 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
27,173 |
|
|
|
28,085 |
|
Stock-based compensation expense |
|
|
6,791 |
|
|
|
6,349 |
|
Impairment loss |
|
|
— |
|
|
|
12,510 |
|
Gain on sale of real estate, net |
|
|
(6,882 |
) |
|
|
(20,545 |
) |
Income from unconsolidated joint ventures |
|
|
(1,739 |
) |
|
|
(1,127 |
) |
Income distributions from unconsolidated joint ventures |
|
|
839 |
|
|
|
— |
|
Straight-line rental adjustment |
|
|
561 |
|
|
|
1,635 |
|
Exchange of prepayment fee for participating interest in mortgage loan |
|
|
— |
|
|
|
(1,380 |
) |
Adjustment for collectability of rental income and lease incentives |
|
|
321 |
|
|
|
26 |
|
Amortization of lease incentives |
|
|
626 |
|
|
|
584 |
|
Provision for credit losses |
|
|
942 |
|
|
|
2,107 |
|
Application of interest reserve |
|
|
(233 |
) |
|
|
(1,788 |
) |
Amortization of debt issue costs |
|
|
791 |
|
|
|
900 |
|
Other non-cash items, net |
|
|
71 |
|
|
|
71 |
|
Change in operating assets and liabilities |
|
|
|
|
|
|
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Lease incentives funded |
|
|
(1,794 |
) |
|
|
(1,023 |
) |
Increase in interest receivable |
|
|
(7,124 |
) |
|
|
(8,605 |
) |
Decrease in accrued interest payable |
|
|
(108 |
) |
|
|
(1,341 |
) |
Net change in other assets and liabilities |
|
|
(3,645 |
) |
|
|
(318 |
) |
Net cash provided by operating activities |
|
|
91,879 |
|
|
|
78,932 |
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
||
Investment in real estate properties |
|
|
(319 |
) |
|
|
(43,759 |
) |
Investment in real estate capital improvements |
|
|
(9,908 |
) |
|
|
(5,053 |
) |
Proceeds from sale of real estate, net |
|
|
33,641 |
|
|
|
51,410 |
|
Investment in financing receivables |
|
|
(97 |
) |
|
|
(112,712 |
) |
Investment in real estate mortgage loans receivable |
|
|
(19,078 |
) |
|
|
(72,260 |
) |
Principal payments received on mortgage loans receivable |
|
|
34,474 |
|
|
|
301 |
|
Investments in unconsolidated joint ventures |
|
|
(11,262 |
) |
|
|
— |
|
Advances and originations under notes receivable |
|
|
(340 |
) |
|
|
(19,258 |
) |
Principal payments received on notes receivable |
|
|
13,268 |
|
|
|
7,077 |
|
Net cash provided by (used in) investing activities |
|
|
40,379 |
|
|
|
(194,254 |
) |
FINANCING ACTIVITIES: |
|
|
|
|
|
|
||
Borrowings from revolving line of credit |
|
|
19,200 |
|
|
|
274,450 |
|
Repayment of revolving line of credit |
|
|
(81,300 |
) |
|
|
(42,200 |
) |
Principal payments on senior unsecured notes |
|
|
(44,160 |
) |
|
|
(44,160 |
) |
Proceeds from common stock issued |
|
|
65,629 |
|
|
|
1,777 |
|
Distributions paid to stockholders |
|
|
(74,684 |
) |
|
|
(70,767 |
) |
Distributions paid to non-controlling interests |
|
|
(109 |
) |
|
|
(1,217 |
) |
Financing costs paid |
|
|
(516 |
) |
|
|
(19 |
) |
Cash paid for taxes in lieu of shares upon vesting of restricted stock |
|
|
(1,533 |
) |
|
|
(1,619 |
) |
Other |
|
|
(31 |
) |
|
|
— |
|
Net cash (used in) provided by financing activities |
|
|
(117,504 |
) |
|
|
116,245 |
|
Increase in cash and cash equivalents |
|
|
14,754 |
|
|
|
923 |
|
Cash and cash equivalents, beginning of period |
|
|
20,286 |
|
|
|
10,379 |
|
Cash and cash equivalents, end of period |
|
$ |
35,040 |
|
|
$ |
11,302 |
|
|
|
|
|
|
|
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
||
Interest paid |
|
$ |
31,288 |
|
|
$ |
35,036 |
|
Non-cash investing and financing transactions: |
|
|
|
|
|
|
||
Contribution from non-controlling interest |
|
$ |
61,025 |
|
|
$ |
12,964 |
|
Investment in financing receivables |
|
$ |
(163,460 |
) |
|
$ |
— |
|
Exchange of mezzanine loan and related prepayment fee for participating interest in mortgage loan |
|
$ |
— |
|
|
$ |
(8,841 |
) |
Exchange of mortgage loans for controlling interests in joint ventures accounted for as financing receivables |
|
$ |
102,435 |
|
|
$ |
— |
|
Reserves withheld at financing and mortgage loan receivable origination |
|
$ |
— |
|
|
$ |
(5,147 |
) |
Accretion of interest reserve recorded as mortgage loan receivable |
|
$ |
233 |
|
|
$ |
1,788 |
|
Decrease in fair value of interest rate swap agreements |
|
$ |
(2,471 |
) |
|
$ |
(123 |
) |
Distributions paid to non-controlling interests |
|
$ |
2,313 |
|
|
$ |
— |
|
Distributions paid to non-controlling interests related to property sale |
|
$ |
2,305 |
|
|
$ |
— |
|
Mortgage loan receivable reserve withheld at origination |
|
$ |
— |
|
|
$ |
1,506 |
|
Supplemental Reporting Measures
FFO and FAD are supplemental measures of a real estate investment trust’s (“REIT”) financial performance that are not defined by U.S. generally accepted accounting principles (“GAAP”). Investors, analysts and the Company use FFO and FAD as supplemental measures of operating performance. The Company believes FFO and FAD are helpful in evaluating the operating performance of a REIT. Real estate values historically rise and fall with market conditions, but cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. We believe that by excluding the effect of historical cost depreciation, which may be of limited relevance in evaluating current performance, FFO and FAD facilitate like comparisons of operating performance between periods. Occasionally, the Company may exclude non-recurring items from FFO and FAD in order to allow investors, analysts and management to compare the Company’s operating performance on a consistent basis without having to account for differences caused by unanticipated items.
FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), means net income available to common stockholders (computed in accordance with GAAP) excluding gains or losses on the sale of real estate and impairment write-downs of depreciable real estate, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. The Company’s computation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or have a different interpretation of the current NAREIT definition from that of the Company; therefore, caution should be exercised when comparing the Company’s FFO to that of other REITs.
We define FAD as FFO excluding the effects of straight-line rent, amortization of lease inducement, effective interest income, deferred income from unconsolidated joint ventures, non-cash compensation charges, capitalized interest and non-cash interest charges. GAAP requires rental revenues related to non-contingent leases that contain specified rental increases over the life of the lease to be recognized evenly over the life of the lease. This method results in rental income in the early years of a lease that is higher than actual cash received, creating a straight-line rent receivable asset included in the consolidated balance sheet. At some point during the lease, depending on its terms, cash rent payments exceed the straight-line rent which results in the straight-line rent receivable asset decreasing to zero over the remainder of the lease term. Effective interest method, as required by GAAP, is a technique for calculating the actual interest rate for the term of a mortgage loan based on the initial origination value. Similar to the accounting methodology of straight-line rent, the actual interest rate is higher than the stated interest rate in the early years of the mortgage loan thus creating an effective interest receivable asset included in the interest receivable line item in the consolidated balance sheet and reduces down to zero when, at some point during the mortgage loan, the stated interest rate is higher than the actual interest rate. FAD is useful in analyzing the portion of cash flow that is available for distribution to stockholders. Investors, analysts and the Company utilize FAD as an indicator of common dividend potential. The FAD payout ratio, which represents annual distributions to common shareholders expressed as a percentage of FAD, facilitates the comparison of dividend coverage between REITs.
While the Company uses FFO and FAD as supplemental performance measures of the cash flow generated by operations and cash available for distribution to stockholders, such measures are not representative of cash generated from operating activities in accordance with GAAP, and are not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to net income available to common stockholders.
Reconciliation of FFO and FAD
The following table reconciles GAAP net income available to common stockholders to each of NAREIT FFO attributable to common stockholders and FAD (unaudited, amounts in thousands):
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||||
|
|
September 30, |
|
September 30, |
|
||||||||||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
GAAP net income available to common stockholders |
|
$ |
29,165 |
|
|
$ |
22,050 |
|
|
$ |
72,446 |
|
|
$ |
61,065 |
|
|
Add: Impairment loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
12,510 |
|
|
Add: Depreciation and amortization |
|
|
9,054 |
|
|
|
9,499 |
|
|
|
27,173 |
|
|
|
28,085 |
|
|
Less: Gain on sale of real estate, net |
|
|
(3,663 |
) |
|
|
(4,870 |
) |
|
|
(6,882 |
) |
|
|
(20,545 |
) |
|
NAREIT FFO attributable to common stockholders |
|
|
34,556 |
|
|
|
26,679 |
|
|
|
92,737 |
|
|
|
81,115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(Less) Add: Non-recurring items |
|
|
(4,173 |
) |
(1) |
|
— |
|
|
|
(5,528 |
) |
(1) |
|
262 |
|
(1) |
FFO attributable to common stockholders, excluding non-recurring items |
|
$ |
30,383 |
|
|
$ |
26,679 |
|
|
$ |
87,209 |
|
|
$ |
81,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
NAREIT FFO attributable to common stockholders |
|
$ |
34,556 |
|
|
$ |
26,679 |
|
|
|
92,737 |
|
|
|
81,115 |
|
|
Non-cash income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(Less) Add: straight-line rental (income) adjustment |
|
|
(37 |
) |
|
|
747 |
|
|
|
561 |
|
|
|
1,635 |
|
|
Add: amortization of lease incentives |
|
|
188 |
|
|
|
171 |
|
|
|
626 |
|
|
|
610 |
|
|
Add: Other non-cash contra-revenue |
|
|
— |
|
|
|
— |
|
|
|
321 |
|
(2) |
|
— |
|
|
Less: Effective interest income |
|
|
(2,470 |
) |
|
|
(2,696 |
) |
|
|
(6,407 |
) |
|
|
(6,524 |
) |
|
Net non-cash income |
|
|
(2,319 |
) |
|
|
(1,778 |
) |
|
|
(4,899 |
) |
|
|
(4,279 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-cash expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Add: Non-cash compensation charges |
|
|
2,269 |
|
|
|
2,123 |
|
|
|
6,791 |
|
|
|
6,348 |
|
|
Add: Provision for credit losses |
|
|
215 |
|
(3) |
|
189 |
|
|
|
942 |
|
(3) |
|
2,107 |
|
(3) |
Net non-cash expense |
|
|
2,484 |
|
|
|
2,312 |
|
|
|
7,733 |
|
|
|
8,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Funds available for distribution (FAD) |
|
$ |
34,721 |
|
|
$ |
27,213 |
|
|
|
95,571 |
|
|
|
85,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less: Non-recurring income |
|
|
(4,493 |
) |
(1) |
|
— |
|
|
|
(7,756 |
) |
(1) |
|
(1,570 |
) |
(1) |
Funds available for distribution (FAD), excluding non-recurring items |
|
$ |
30,228 |
|
|
$ |
27,213 |
|
|
$ |
87,815 |
|
|
$ |
83,721 |
|
|
_______________ |
||
| (1) | See the reconciliation of non-recurring items on the following page for further detail. |
|
| (2) | Represents the straight-line rent receivable write-off of $321 related to converting a lease to fair market rent. |
|
| (3) | Includes provision for credit losses reserve recorded upon origination of acquisitions accounted for as financing receivables, and mortgage loans, offset by mortgage loan payoffs. See the reconciliation of non-recurring items on the following page for further detail. |
|
Reconciliation of FFO and FAD (continued)
The following table continues the reconciliation between GAAP net income available to common stockholders and each of NAREIT FFO attributable to common stockholders and FAD by reconciling the non-recurring items (unaudited, amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
Three Months Ended |
|
Nine Months Ended |
|
|||||||||||
|
|
September 30, |
|
September 30, |
|
|||||||||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|||||||
Reconciliation of non-recurring adjustments to NAREIT FFO: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Provision for credit losses reserve recorded upon origination |
|
$ |
— |
|
|
$ |
— |
|
$ |
1,635 |
|
(1) |
$ |
1,832 |
|
(1) |
Provision for credit losses recovery related to loan payoffs |
|
|
(293 |
) |
(1) |
|
— |
|
|
(1,227 |
) |
(1) |
|
— |
|
|
Provision for credit losses related to effective interest receivable write-off on partial principal paydown |
|
|
613 |
|
(2) |
|
— |
|
|
613 |
|
(2) |
|
— |
|
|
Add: Total provision for credit losses non-recurring adjustments |
|
|
320 |
|
|
|
— |
|
|
1,021 |
|
|
|
1,832 |
|
|
Add: Straight-line rent receivable write-off |
|
|
— |
|
|
|
— |
|
|
321 |
|
(5) |
|
— |
|
|
Deduct: Mortgage interest income related to the exit IRR received |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
(1,570 |
) |
(8) |
Deduct: Other income from former operators |
|
|
(4,052 |
) |
(3) |
|
— |
|
|
(4,052 |
) |
(3) |
|
— |
|
|
Deduct: Rental income related to sold properties |
|
|
(441 |
) |
(4) |
|
— |
|
|
(2,818 |
) |
(6) |
|
— |
|
|
Total non-recurring adjustments to NAREIT FFO |
|
$ |
(4,173 |
) |
|
$ |
— |
|
$ |
(5,528 |
) |
|
$ |
262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Reconciliation of non-recurring adjustments to FAD: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Deduct: Mortgage interest income related to the exit IRR received |
|
$ |
— |
|
|
$ |
— |
|
$ |
(886 |
) |
(7) |
$ |
(1,570 |
) |
(8) |
Deduct: Other income from former operators |
|
|
(4,052 |
) |
(3) |
|
— |
|
|
(4,052 |
) |
(3) |
|
— |
|
|
Deduct: Rental income related to sold properties |
|
|
(441 |
) |
(4) |
|
— |
|
|
(2,818 |
) |
(6) |
|
— |
|
|
Total non-recurring cash adjustments to FAD |
|
$ |
(4,493 |
) |
|
$ |
— |
|
$ |
(7,756 |
) |
|
$ |
(1,570 |
) |
|
| _______________ | ||
(1) |
A 1% credit loss reserve is taken upon origination of financing transactions, then decreased as the balance is paid down through scheduled principal payments and payoffs. |
|
|
||
| (2) | The effective interest receivable write-off related to a partial principal paydown on a mortgage loan. |
|
| (3) | Represents income received from former operators related to portfolio transitions in prior years. |
|
| (4) | Represents rent through the initial lease term, which was received upon sale of an 80-unit assisted living community covered under the lease. |
|
| (5) | Represents the straight-line rent receivable write-off related to a lease that converted to fair market rent during 2Q 2024. The straight-line rent write-off is a contra-revenue on the Consolidated Statements of Income. |
|
| (6) | Represents (3) from above and the rent credit received in connection with the sale of a 110-unit assisted living community in Wisconsin. The rent credit was provided to the operator during new construction lease-up. |
|
| (7) | The exit IRR income was received upon the payoff of three mortgage loans in 2024. The exit IRR was previously recorded ratably over the term of the loan through effective interest income. |
|
| (8) | The exit IRR income was received upon the payoff of two mezzanine loans in 2023 and was not previously recorded. |
|
Reconciliation of FFO and FAD (continued)
The following table continues the reconciliation between GAAP net income available to common stockholders and each of NAREIT FFO attributable to common stockholders and FAD (unaudited, amounts in thousands, except per share amounts):
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NAREIT Basic FFO attributable to common stockholders per share |
|
$ |
0.79 |
|
$ |
0.65 |
|
$ |
2.14 |
|
$ |
1.97 |
|
NAREIT Diluted FFO attributable to common stockholders per share |
|
$ |
0.78 |
|
$ |
0.65 |
|
$ |
2.11 |
|
$ |
1.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NAREIT Diluted FFO attributable to common stockholders |
|
$ |
34,757 |
|
$ |
26,826 |
|
$ |
93,248 |
|
$ |
81,555 |
|
Weighted average shares used to calculate NAREIT diluted FFO per share attributable to common stockholders |
|
|
44,696 |
|
|
41,469 |
|
|
44,133 |
|
|
41,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic FFO attributable to common stockholders, excluding non-recurring items, per share |
|
$ |
0.69 |
|
$ |
0.65 |
|
$ |
2.01 |
|
$ |
1.98 |
|
Diluted FFO attributable to common stockholders, excluding non-recurring items, per share |
|
$ |
0.68 |
|
$ |
0.65 |
|
$ |
1.99 |
|
$ |
1.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted FFO attributable to common stockholders, excluding non-recurring items |
|
$ |
30,584 |
|
$ |
26,826 |
|
$ |
87,720 |
|
$ |
81,817 |
|
Weighted average shares used to calculate diluted FFO, excluding non-recurring items, per share attributable to common stockholders |
|
|
44,696 |
|
|
41,469 |
|
|
44,133 |
|
|
41,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic FAD per share |
|
$ |
0.79 |
|
$ |
0.66 |
|
$ |
2.21 |
|
$ |
2.07 |
|
Diluted FAD per share |
|
$ |
0.78 |
|
$ |
0.66 |
|
$ |
2.18 |
|
$ |
2.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted FAD |
|
$ |
34,922 |
|
$ |
27,360 |
|
$ |
96,082 |
|
$ |
85,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used to calculate diluted FAD per share |
|
|
44,696 |
|
|
41,469 |
|
|
44,133 |
|
|
41,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic FAD, excluding non-recurring items, per share |
|
$ |
0.69 |
|
$ |
0.66 |
|
$ |
2.03 |
|
$ |
2.04 |
|
Diluted FAD, excluding non-recurring items, per share |
|
$ |
0.68 |
|
$ |
0.66 |
|
$ |
2.00 |
|
$ |
2.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted FAD, excluding non-recurring items |
|
$ |
30,429 |
|
$ |
27,360 |
|
$ |
88,326 |
|
$ |
84,161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used to calculate diluted FAD, excluding non-recurring items, per share |
|
|
44,696 |
|
|
41,469 |
|
|
44,133 |
|
|
41,440 |
|
